An annuity is a financial product you can buy from an insurance company guaranteeing your income for life in retirement. You buy an annuity from an insurance company in exchange for your pension pot just before you retire. Annuities give you a regular income for life in retirement.

A guaranteed annuity rate (GAR) determines how much retirement income you get. The rate varies according to your age, health and where you live, based on current market rates. A rate of 5% means that, for every £100 of savings, you would get £5 per year in income. Annuity rates are much lower today than they were in the 1980s and 1990s.